Nearly all business opportunities come with at least some financial risk. Purchasing and operating a franchise is no exception. Many Americans mistakenly believe that franchise opportunities have no or few associated risks. Unfortunately, this is far from the case.
Franchises are not typically turnkey businesses. In other words, your franchise will not come equipped with supplies and employees or even a location, for that matter. You will need to spend before you can succeed, which is always risky.
What are some specific risks associated with a franchise purchase?
To make the best risk assessment, you will benefit from legal guidance tailored to your needs as well as the franchise’s current place in the American market. However, some risks apply to all franchising opportunities. Some examples of these risks include:
- Fad opportunities. If you purchase a franchise involving fads or unproven trends, you may be taking a huge financial risk. In most cases, it is better to choose a franchise with a proven record of success.
- Seasonal goods. Buying a franchise that experiences its greatest success during specific times of the year is also risky. For example, if you open a franchise that exclusively deals in holiday décor, your business could fail.
- Regional goods. Suppose you want to buy a boutique-style swimwear franchise, but you live in Alaska. Although people in Alaska do enjoy swimming, they may not want to spend a lot of money on boutique swimwear to use for only a short time of the year.
Our franchise law attorneys urge you to seek professional guidance if you want to purchase a franchise. Legal counsel can help you avoid potential mistakes while also increasing your odds of success. You can learn more by exploring the many resources available on our website.